U.S. stock indexes opened higher in a tepid celebration of Cyprus's bailout deal reached late Sunday, but it was enough for the Dow Jones industrial average to hit its highest intraday level ever. While market players are relieved the country has been saved from an immediate financial collapse, lingering concerns over whether the island nation will avoid a deep recession and be able to stay in the euro zone are keeping investors cautious.
Meanwhile, Research In Motion Ltd. is weighing on the TSX for the second straight day in a row; its shares opened down 8 per cent, but have since sliced those losses in half. Goldman Sachs downgraded the stock to "neutral" today amid early signs that the Z10 has been slow to spark much buying excitement in the U.S., where it went on sale on Friday. Goldman cut its 12-month price target to $17 (U.S.) from $19 and reduced its estimated probability of success for the new BB10 smartphones to 20 per cent from 30 per cent. It said its retail checks of retail stores "revealed a surprising lack of marketing support and poor positioning of the product."
Just past 10 a.m. (ET), the Dow Jones industrial average was up 44 points, or 0.3 per cent, at 14,556, which surpasses its previous highest level during the trading day - from last week - of 14,546.82.
The S&P 500 was up 7.7 points, or 0.5 per cent, at 1,564.68. That's less than 1 point away from its record closing high of 1,565.15 from more than five years ago - but more than 10 points away from its record intraday level of 1,576.09.
The S&P/TSX composite index was flat.
Late Sunday, Cyprus agreed to raise €4.2-billion (or $5.5-billion U.S.) in return for a €10-billion rescue from European regulators. The deal does come at quite a cost for Cyprus, however: the country's large banking sector will be shrunk considerably, and depositors holding more than €100,000 will be slapped with a substantial levy.
The deal pushes the country back from a banking collapse and its likely exit from the euro zone, but the strict capital controls - and the rejected proposal from last week that would have hit even smaller depositors with a levy - will undermine confidence in the island nation for years to come.
Moody's this morning is saying just that, commenting that the new deal may not be enough to secure the country's future in the euro zone. "These measures have already damaged the financial sector’s reputation and business model, and the system’s profile as an offshore financial centre is unlikely to survive this crisis," the credit agency said.
But the good news for markets is that the country doesn't face immediate financial collapse, which could have reverberated across the euro zone at time when the region was just starting to recover from the more broader debt crisis.
Not surprisingly, the euro strengthened overnight and bond yields declined in Europe, with Spain's 10-year bond yield falling about five basis points to 4.80 per cent. European stocks this morning are off their highs, but still up about half a percent.
The celebration of the deal was a little more muted in Asia, although Japan's Nikkei index jumped 1.68 per cent, aided by expectations that the Bank of Japan's new governor will outline new stimulus measures during testimony to parliament on Tuesday.
There are no major economic reports planned for today, although markets will be monitoring Federal Reserve Chairman Ben Barnanke for any fresh clues on the direction of monetary policy as he appears at a panel discussion at the London School of Economics.
In other corporate news today, Blackstone Group LP and activist investor Carl Icahn have submitted proposals that would exceed the $24.4-billion offer from Dell and SIlver Lake Partners to take Dell Inc. private. Shares in Dell are up 3 per cent.
Yahoo Inc. shares are up 2 per cent at fresh 52-week highs after the Internet giant acquired Summly, a mobile news reader app. Terms were not disclosed.
And Dollar General Corp. said its sales growth this year could surpass the strength it saw in 2012, as its fourth-quarter profit came in well ahead of analysts’ expectations despite lighter-than-anticipated sales growth. Shares are up 4 per cent.